Real Estate Bubble Debate

Cape Cod Bubble Map documents sales below assessed value

Curious that yesterday's cover story in the Boston Globe, The Summer of their Discontent, did not include the word "housing" or "real estate" despite the reports by one blogger "that home sales on Cape Cod were off some 20.1% year to date and a whopping 30.7% in July as compared to July of 2005."

So to document what's happening there, the Real Estate Cafe created the Cape Cod Bubble map, using information supplied by RealtyInsite.com, to identify properties selling for below assessed value during one thirty day stretch near the end of the sales season (7/22-8/22/06).  (It could take a few moments to download):

To scan the complete list of 140 plus properties by community, use the scroll bar on this larger screen format. We assume our readers know more than we do, so add comments, or post additional properties selling below assessed value, by logging onto this map for the Cape, this map for Boston, or this wiki which is waiting for user-generated bubble maps to be added in other overvalued housing markets across the country.  It's also easy to start your own local bubble map or republish any of ours to your blog, or even select some of these bubble comps to submit with your offer.  Contact The Real Estate Cafe for more information at [email protected] or 617-876-2117.

Industry's seller bias understates risk to homebuyers

Kudos to the Boston Herald for asking "Has the Mass. housing bubble burst?" on their front page this morning.

If homebuyers focus on median sales prices, they might reach the same conclusion the Massachusetts Massachusetts Association of Realtors (MAR) did three months ago when they told the public that a "New study finds no evidence of a “housing bubble” in metro Boston."

Afterall, according to MAR's report on existing home sales during July 2006, median single-family home prices decreased just 3.5 percent from the previous year, despite declining sales during 17 of the past 18 months.  To their credit, MAR also disclosed:  (1) that is the largest annual price decline since March 1993; (2) median sales prices have declined for six consecutive months, and (3) that is the longest slump since housing prices fell 13 straight months from March 1992 to March 1993.

What raises questions is that The Warren Group reported that median sales prices for single-family homes fell by 6.1% or 74% more than MAR's figure.  Maybe that's because MAR based their assessment on a median single-family price of $361,750; in contrast, The Warren Group's median (which includes sales outside the MLS) was $339,000 or $22,750 (6%) less.  Far more alarming is that The Warren Group figure is $1,000 less than their median sales price two years ago, $340,000.

So, despite the lowest prices in two years and the sharpest drop in sales since 1995, what's distressing -- as a buyer's agent -- is that MAR's talking points continue to understate the risk for homebuyers:

"Today’s lower prices reflect softening buyer demand and rising in inventory levels, which have started to trigger modest price adjustments on the part of sellers. With demand still historical strong though, major price corrections are unlikely."

If homebuyers look beyond median prices to individual transactions, they'll see that major price corrections are already underway.  The Real Estate Cafe has already mapped nearly 400 sales below assessed value across 27 of the most expensive cities & towns in Greater Boston. In coming days, we'll post another 200 sales to our real estate bubble map including 50 in Greater Boston plus another 150 from Southeastern Massachusetts, primarily on Cape Cod courtesy of RealtyInsite.com.  If you see evidence that prices are falling, please post them to the real estate bubble map or create your own.  If you're one of our clients, we'll reward you for each property (see "Tipping Policy" for more detail.)

Chat about Jan. 2006 home sales in Boston / Massachusetts

The Massachusetts Association of Realtors is expected to post January sales statistics to their web site sometime around noon today.  To help make sense of them, The Real Estate Cafe is hosting four chats through the day which the public can join as a guest (if you are unable to see any graphics when you enter the chat room, try clicking on the link below): 

Bubble Hour #1:  Noon to 1pm

Transcript & graphs since 7:20am now online.

Bubble Hour #2:  6:30 to 7:30pm

If there is interest, we'll do this one in person at Borders Bookstore Cafe @ CambridgeSide Galleria tonight or maybe tomorrow.  Please RSVP in advance so we can make that decision.

Bubble Hour #3:  8:00pm to 9pm

We anticipate the largest number of participants for this Bubble Hour, including a special guest from one of that state registry of deeds who will share some statistics for February, three weeks ahead of the Mass. Association of Realtors release their own.

Bubble Hour #4:  11pm to midnight

We have a number of people who house hunt just before heading to bed so to accommodate them, we'll host one more bubble hour today

We've already begun posting some content on line, and invite your comments and questions here or in the chat room.  One note of caution:  overall market statistics, like those being released today by the Mass. Association of Realtors, are often too broad to translate into meaningful information at the local level. That's one of the reasons chat participants with different perspectives --- both geographically and with respect to their opinion about the housing bubble -- are welcome.  (As always, you can also call our reader line to record your own sound bite:  617-876-2117 for potential use in a future podcast.)

Real estate bubble: Top news story of 2005?

For the past month, two Boston Globe real estate articles, one on falling prices and the other on rising foreclosures, have topped their list of "Most Popular Stories" (click on image for larger view).  Now, guess what their cross-town rival, the Boston Herald, has listed as #1 on their "top business and economics highlights of 2005"?

1. Pop goes the bubble — The state’s housing bubble finally sprang a leak this year, with a noticeable slowdown in sales, a falling off in prices and long waits to sell homes. Partly brought about by rising interest rates, the slowdown was evident by May, when housing sales fell by 11 percent over the prior year. The market hasn’t shown much improvement since.

The rest of the Herald's list includes factors that have contributed to the end of the real estate bubble and will continue to pull down housing prices in coming months and years: slow job growth in the state, rising gas and energy prices, and loss of major Massachusetts employers through mergers, acquisitions, and relocations. 

TEST MARKETING AN IDEA

The Real Estate Cafe has been tracking factors underlying the housing market in Boston since 2000, the peak of the dot.com boom, and we are eager to share our knowledge and get your insight, too.  Would you be interested in participating in a monthly or bi-weekly real estate round table, or since we'll probably host the conversation in a restaurant or bar, an occasional "Bubble Hour" or "Boston Realty Party" in 2006? If so, we'd like to hear from you particularly if you want to be a featured guest. 

We know that our clients tend to be part of the "do-it-yourself" movement, but this is one of the ideas we're exploring to increase peer-to-peer interaction in 2006.  Please let us know if you have ideas about how we can help you learn from each other to make more informed decisions, avoid making mistakes, and ultimately, save money.

Boston housing market 2006: "Hard landing" or "return to normalcy"?

Three weeks after economist Nicholas Perna told the Boston Globe that "both early data and the anecdotes -- are pointing more toward a hard rather than a soft landing" for the [Massachusetts] housing market, Perna repeated that assessment in the Boston Herald following news that single-family home sales fell 9.2 percent in November.  Need to confirm, but isn't that the four month this year of near double-digit decreases compared to 2004?

"It sounds more and more like the housing adjustment is a harder landing in Massachusetts than elsewhere in the country,' said economist Nicholas Perna. 'I don’t think we are seeing anything like that in the country as a whole. My guess is that Massachusetts is among the most seriously affected."

Some real estate professionals dismissed the significance of falling sales, calling them a "return to normalcy."   What's your take?  Your comments are welcome below, or on our readers' "record your own podcast" line:  617-876-2117.

Quick overview of November housing statistics from the Boston Globe:
November home sales off sharply

"The median condo price slid 2.3 percent to $265,000 in November from October. That's about the same as it was in November 2004.

Sales of single-family homes fell 9.2 percent in November compared to a year ago, the second consecutive steep monthly decline.

The Massachusetts Association of Realtors, in its November report on the state's housing market, said yesterday that 3,713 single-family home sales closed, down from 4,089 in November last year.

Despite the decline, the median price ROSE (emphasis added) modestly, to $354,000 last month. That's 1.7 percent higher than in October and 2.3 percent above November 2004."

Single family housing prices may have risen slightly last month, but this graph of real estate cycles over the past 30 years in Boston, created by Douglas McCarroll, one of The Real Estate Cafe's fee-for-service buyer agent / real estate consultants, gives some context for predictions that the Boston housing market is merely returning to "normalcy."

Party like it's 1773... ...or should we say, like the real estate party's over?

Yankees vs. Red Sox rivalries aside, Inman New's recent blog post about a Great Gatsby-esque real estate party in the Big Apple, described as an "elbow-to-elbow soiree straight out of Hollywood... that attracted at least 1,000 of the city's brokers and agents," had readers in Boston gagging and giggling.   

Anyone who thinks the good times will continue to roll in real estate is in for a Big Surprise, which is why bloggers in Boston secretly used the 232nd anniversary of the Boston Tea Party to plan a series of "Boston Realty Parties" celebrating the end of the housing bubble here and beginning of the first buyers' market in more than a decade.

The upcoming series of events will inform and protect real estate consumers, and aspires to bring about long overdue industry reforms (like rebelling against obsolete real estate commissions that are akin to excessive taxes on tea two hundred years ago.)  Don't believe the party's over in Boston?  Check out the (1) housing price index graphs by one of The Real Estate Cafe's buyer agents / real estate consultants, (2) view our recent series of bar charts analyzing market statistics behind the  "hard landing" for the Boston housing market, or (3) scan the Boston Globe stories and video clip on Boston.com.

While the photo above was taken at the historic tea party site in Boston Harbor, the "Coming soon" sign points to the "coming slowdown," as Business Week called it, in other housing markets, while documenting the importance of December 16, 1773 in American history (click on photo to enlarge).  Why was the photo taken at night?  Check your high school history books or visit the Boston Tea Party's web site to find out. 

Sharp price reductions point to hard landing for Boston Housing Market

NEWS FLASH:  Watch for more analysis and graphs of data behind the headline story in upcoming blog posts.  Should we host a Boston Realty Party -- online or in person?  -- to celebrate the end of the real estate bubble and the beginning of the first buyers' market in more than a decade in Boston?

Sellers chop asking prices as housing market slows
Cuts of up to 20% are now common as analysts see signs of a 'hard landing'
By Kimberly Blanton, Boston Globe Staff  |  December 9, 2005

''The evidence -- both early data and the anecdotes -- are pointing more toward a hard rather than a soft landing" in the housing market, said Nicholas Perna, an economic consultant in Ridgefield, Conn. ''Prices could come down. Could it be 10 to 15 percent? There's no way of knowing, but what we're getting is more clues that you've got a decline in prices underway.

Some of research conducted by The Real Estate Cafe was featured prominently in the article, although the contribution made via an interview with one of our buyers was less obvious:

Moderately priced homes are feeling the brunt of the price squeeze, according to an analysis of MLS listing data by Cambridge broker Bill Wendel.

Statewide, 38,418 houses had priced reductions between Jan. 1 and Nov. 24, or 22 percent more than the number of reductions during the same period in 2004. But the number of price reductions on homes between $500,000 and $1 million increased by 36 percent. One price segment that ''jumps off the page as soft," said Wendel, is the $500,000 to $600,000 price range, the fourth most active segment of the single-family housing market. It had 1,258 more markdowns, up 40 percent from last year.

The Boston Globe has aggregated some of their recent stories on the changing market into this Special Section online.  Now you can see why The Real Estate Cafe wants to throw a Boston Realty Party, on December 16, the 232 anniversary of the Boston Tea Party, for homebuyers to celebrate the end of the real estate bubble and the beginning of the new buyer's market!  Let us know if you'd be interested in participating online or in person in the Boston area.

Holiday homebuyers: 1 in 5 homes sells for at least 10% off, expect more this year!

How much excess housing inventory is on the market in Massachusetts compared to past years, and what will that mean to holiday homebuyers?  According a Boston Globe article entitled, Season can leave buyers in good cheer (November 30, 2003)

"...November and December are typically the two months with the fewest number of houses for sale. Between 1997 and 2002, the average number of homes on the market in Massachusetts in any given month was 33,636. The November average was 29,733, and the December average was 28,378."

Two years later, a simple tally of MLS listings in Massachusetts shows 44,646 single family, condominium, and multi-family properties currently on the market.  Add land parcels, and that number rises to 47,476 listings.  If you use the first figure, the inventory is up by 50% over November 2003.  If you use the second, inventory is up over 60%. 

What's that mean for the average homebuyer?  As The Real Estate Cafe told the Boston Globe in November 2003, end of season markdowns make the holidays an ideal time for homebuyers to bargain hunt:

According to [our] analysis of listing data between 1996 and 2002, one in five Massachusetts properties that went under agreement between Thanksgiving and New Year's Day sold for at least 10 percent below the original asking price. 

Larger savings are possible this year because of the oversupply of inventory and the soaring number of expired listings as shown in the graph above (click on image for larger view).  If you'd like to learn how you can time the market to maximize your savings and stretch your savings enough further with our unrivaled commission rebates, give us a call at 617-661-4046 or email us [email protected].

Mass. Exodus: A generation & housing market in transition

MassInc, a public interest research group, released their newest report this morning, "A Generation in Transition:  A Survey of Bay State Baby Boomers."  The survey asked 1,000 baby boomers in Massachusetts about "their current circumstances and future plans for work, retirement, [and] housing..."

One key finding parallels a phenomena The Real Estate Cafe has witnessed working with home buyers in suburban Boston, where it sometimes appears that neighborhoods are "turning over:"

"The survey also foreshadows a new boomer exodus from Massachusetts – exacerbating the state’s population loss challenge. More than one-third of baby boomers (35 percent), roughly 650,000 people or 10 percent of the state’s population, want to retire outside of Massachusetts."

"There are 1.83 million boomers in Massachusetts, accounting for nearly 30 percent of the state’s population and roughly 45 percent of its workforce. The first baby boomers turn 60 in January 2006."

About a decade ago, 2006 was the date some economists predicted would be a tipping point in the housing market.  More recently industry observers have said that housing demand from baby boomers is increasing, and that traditional assumptions about downsizing and relocating are obsolete.  MassInc's report demands closer reading to make more sense of those conflicting scenarios.

While I've yet to read the full report, my working hypothesis is that the "Mass. exodus" -- pun intended -- is bad news for sellers who are already confronting falling prices, a record number of expired listings, and the first buyers' market in a decade. 650,000 people represents about ten years worth of housing inventory. Granted, not all baby boomers live alone, so cut that number by half or one third.  That still leaves five to seven years supply of housing, presumably single family homes.  How fast will they come on to the market?  What impact will those units have on sales prices, especially if energy prices and interest rates continue to rise?

My guess is that those kind of questions are addressed in the report, and will be discussed in a roundtable discussion on Friday, December 2, 2005, 8:00 to 10:00am at the Westin Copley Place Boston.  Until then, your comments are welcome here online, or on The Real Estate Cafe's readers' line, 617-876-2117.

Spring forward, fall back: Resetting the Foreclosure Clock

There was a time when CENTURY 21, the world's largest real estate organization with 110,000 brokers and agents in more than 25 countries, used the slogan, "We sell a home every minute of every day."  On the day after Halloween, transactions per minute have come back into the real estate vocabulary with a frightening, downward spin that could make recent and potential homebuyers run for cover, at least in the UK.  There, an article entitled, Increase in repossessions show housing bubble is close to bursting, published this stunning statement and the statistics on the link below:  "in England and Wales a repossession order is made every seven minutes and an action is entered into every four minutes."

Think It could never happen here?  Don't be so sure... check out the nearly 1.5 million foreclosures, foreclosures, bankruptcies, and tax liens already recorded nationwide on Foreclosure.com and speculation earlier this summer about the prospect of "repossession riots" in the future.  (The Real Estate Cafe's predecessor, the Massachusetts Homebuyers Club helped the federal government sell foreclosed properties in 50 major cities across 25 states in the last real estate recession from 1991 to 1995.)

Regionally an action is entered into every:

• London: 24 minutes
• South East: 30 minutes
• West Midlands: 43 minutes
• North West: 42 minutes
• Eastern Region: 45 minutes
• Yorks and Humber: 47 minutes
• East Midlands: 58 minutes
• South West: 64 minutes
• Wales: 81 minutes
• North East: 87 minutes
• Merseyside: 153 minutes

Regionally a repossession order is made every:

• London: 37 minutes
• South East: 45 minutes
• West Midlands: 61 minutes
• North West: 66 minutes
• Eastern Region: 68 minutes
• Yorks and Humber: 80 minutes
• East Midlands: 88 minutes
• South West: 90 minutes
• Wales: 122 minutes
• North East: 140 minutes
• Merseyside: 207 minutes

Commenting on the figures Vince Cable MP, Liberal Democrat Shadow Chancellor said:

"These figures are deeply worrying. While they are at low levels compared to the early 1990's there are clearly big problems ahead."

"Banks and building societies need to ensure that when individuals take out mortgages they are fully aware of the risks that are involved and of the relevant insurance products."

"At long last the Chancellor has now accepted there is a bubble in the housing market. Now he needs to recognise that for many homeowners it is sadly bursting and that he needs to take action."